Dynasty. As such, it is likewise unchallenged that no advertising injury coverage exists if the common law definition of unfair competition applies to the policies at issue in this case.
On the other hand, the California Business and Professions Code § 17200 defines unfair competition broadly "to protect consumers as well as competitors" and "it is not confined to anticompetitive business practice but is equally directed toward 'the right of the public to protection from fraud and deceit.'" Stoiber v. Honeychuck, 101 Cal. App. 3d 903 at 927, 162 Cal. Rptr. 194 (1980) (citations omitted).
Clearly, then, the court's decision as to which of the proffered interpretations of unfair competition is appropriate will be dispositive of the advertising injury coverage question.
Dynasty's argument that the broader statutory definition of unfair competition should apply, in essence, follows a simple path. First, Dynasty indicates that under California law, an insurance policy provision "is ambiguous when it is capable of two or more constructions, both of which are reasonable." Producers Dairy Delivery Co. v. Sentry Ins. Co., 41 Cal. 3d 903, 912, 226 Cal. Rptr. 558, 718 P.2d 920 (1986). Dynasty then offers evidence of a dictionary definition
of unfair competition consistent with the definition in Cal. Bus. & Prof. Code § 17200 in order to demonstrate the reasonableness of such a construction of those terms. Indeed, Dynasty ventures to underscore the reasonableness of such a construction by equating the dictionary definition with a "layman's" understanding of the terms.
A reasonable interpretation of unfair competition other than the common law one having been established, so Dynasty's argument goes, the terms must be considered ambiguous as a matter of law. Once the court is led to this juncture, Dynasty points the remaining way home by directing the court to the long-settled principle of construction that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer. Reserve Ins. Co. v. Pisciotta, 30 Cal. 3d 800, 807, 640 P.2d 764, 180 Cal. Rptr. 628.
The court finds that Dynasty's argument, though not without a certain syllogistic attractiveness, fails because it neglects to adhere to other elementary principles of contract construction. Dynasty makes no effort to corroborate its construction of unfair competition by reference to the surrounding language in the Nationwide policies. Rather, it analyzes the terms almost entirely in isolation. In so doing Dynasty runs afoul of the obligation to read the disputed terms in the context in which they appear. "Language in a contract must be construed in the context of that instrument as a whole and in the circumstances of that case, and cannot be found to be ambiguous in the abstract." Producers Dairy Delivery Co. v. Sentry Ins. Co., 41 Cal. 3d 903, 916 n. 7, 718 P.2d 920, 226 Cal. Rptr. 558; see also Trans America Ins. Co. v. Sayble, 193 Cal. App. 3d 1562, 1566, 239 Cal. Rptr. 201 (1987) ("A contract must be construed as a whole without giving a distorted emphasis to isolated words and phrases."); Cook v. Penn Mutual Life Ins. Co., 218 Cal. App. 2d 194, 197-198, 32 Cal. Rptr. 400 (1963) ("While a policy term may appear ambiguous if viewed in isolation, there is no ambiguity if its meaning can be determined by fair inference from the policy terms."); Cal. Civ. Code § 1641.
Reading it in context, the court detects no ambiguity in the meaning of the term unfair competition as used in Nationwide's policies. This term appears in both the primary and umbrella policies alongside a host of readily identified common law torts including libel, slander, defamation and piracy. Moreover, in the umbrella policy, unfair competition is joined by "piracy" and "misappropriation of idea" in a further designated subset of the advertising injury offenses. That subset unambiguously refers to legal rights among business rivals, and the only reasonable interpretation of unfair competition which emerges from such positioning of the terms is the common law definition relating to the taking and using as one's own that which belongs to one's competitor.
Finally, the court is further persuaded by Nationwide's contention that adoption of the statutory definition of unfair competition would render meaningless the enumerated companion torts. Dynasty admits that Cal.Bus. & Prof.Code § 17200 broadly defines unfair competition. In fact, that statute's prohibition against "unlawful, unfair or fraudulent business practice" has been held to apply to "anything that properly can be called a business practice and that at the same time is forbidden by law." People v. McKale, 25 Cal. 3d 626, 632, 159 Cal. Rptr. 811, 602 P.2d 731 (1979). Piracy, infringement, idea misappropriation and the remaining torts almost surely would be surplusage, then, were the far reaching California statutory definition of unfair competition to apply. For the court to so construe the insurance contract it would have to abandon its responsibility, outlined in detail above, to give effect to each part of the instrument.
Several other courts have reviewed this question in nearly identical circumstances and have reached the same conclusion. In Westfield Ins. Co. v. TWT, Inc., 723 F. Supp. 492, 496 (N.D.Cal. 1989), the court denied an insured's request to employ the California unfair competition statute in interpreting the scope of advertising injury coverage for unfair competition. Judge Legge reasoned in TWT as follows:
Courts have retained the more restrictive common law meaning of unfair competition in the interpretation of insurance policies, even when the term in a state statute has been interpreted more expansively. [citations omitted]. Here [the insured] was not in competition with [plaintiff in the underlying suit], and [plaintiff in the underlying suit] has not and could not state a claim for the tort of unfair competition on the present record. Therefore, there is no duty to defend based on the "unfair competition" policy coverage.